Governor Proposes Narrowing Tax Breaks to Fund Education

This morning, Governor Inslee unveiled a framework for addressing the gap between available state tax resources and what is needed to fund court-ordered improvements to schools and sustain existing investments. The Governor proposes to eliminate a number of costly and ineffective tax breaks. While this is a bold first step in the right direction, more revenue is needed to rebuild healthy, safe, and well-educated communities in Washington state.

Key highlights of the Governor's proposal include:

New resources to support a better future for our kids

A $1 billion down-payment is made towards meeting the requirements of the McCleary decision, to shrink class sizes, expand full-day kindergarten, increase class instruction time, and increase funding of basic operations for schools such as maintenance, supplies, and school buses. This is a modest investment towards the estimated $4.5 billion needed to fully fund education by 2018 (see graph below).

Targeted investments give kids the resources and opportunities they need to grow and prosper, such as access to preschool opportunities for 3,000 more kids, and support to make sure that kids who are falling behind can catch up.

Health reform to support a strong middle class

The Governor’s proposal promotes a healthy workforce by restoring adult dental services and expanding Medicaid, which will help more than 250,000 Washingtonians gain health coverage.

Responsible revenue enhancements

To generate the additional tax resources needed to make these new investments, the Governor proposes to generate about $1.2 billion in new revenue for the upcoming 2013-15 budget cycle.

Extending two temporary tax increases ($660 million): In 2010, policymakers adopted two temporary surcharges applied to breweries and businesses in the service industry to help maintain funding for schools, child care, health care, and other core public services during the worst part of the Great Recession. At the end of June, the fifty-cent per gallon increase in the beer excise tax and the 0.3 percentage point increase in the “service and other” business and occupation (B&O) tax were set to expire. The Governor proposes to make these increases permanent.

Narrowing tax breaks ($565 million): As we’ve previously written, there are 640 tax breaks on the books in Washington state, many with little or no economic value. Governor Inslee proposes to narrow or eliminate 11 tax breaks – including a sales tax break on trading-in luxury cars, boats and other vehicles ($95 million); a sales tax break for certain nonresidents ($64 million); reducing a number of preferential B&O rates by 25 percent ($66 million); sales tax break on bottled water ($52 million); among others.

This is a good start, but more is needed to generate enough resources to provide a better future for all Washingtonians. Additional revenue could avert some of the cuts that harm our ability to build a middle class, such as cuts to WorkFirst, which helps families find and keep a job, and the elimination of assistance for people with disabilities.

More analysis on the Governor’s proposal to come. Stay tuned to schmudget.

Our Executive Director Remy Trupin released a statement this morning on the Governor’s proposal. Read it here.

Watch the Budget Matters Plenary

View the Budget Matters 2016 conference plenary panel, "What's at Stake in the 2017-2019 Budget: Funding McCleary and Beyond," on TVW. Moderated by Ann Dornfeld of KUOW with a budget overview by our own Andy Nicholas, the panel features Nathan Gibbs-Bowling, the 2016 Washington State Teacher of the Year; Lew Moore of the Washington Research Council; Roxana Norouzi of OneAmerica; and Sen. Christine Rolfes. The plenary starts after a brief intro by Executive Director Misha Werschkul and an intro video by Gov. Inslee.

Our Legislative Agenda

Our agenda for the 2015-2017 biennium calls for an equitable, sustainable revenue system in addition to state investments that: promote a world-class education system; sustain a strong middle class; produce living-wage jobs, and ensure that all Washingtonians have equal opportunity to get ahead.

Testimonies in Olympia

We testified in support of a number of important bills during the 2016 legislative session. Take a look:

Our testimony (at the 23:23 minute mark) on the House Bill that would take a two-generation approach to preventing poverty

Our testimony (at the 1:54:09 mark) on the House bill focused on aerospace-related tax breaks